Question 3 Consider the standard Harberger general equilibrium tax incidence model discussed in Chap- ter 6 (section 4) of the lecture notes. Assume, however, that the X-sector is relatively capital- intensive according to both intensity measures. Derive the effects of an increase in the tax on capital in the Y-sector (i.e. an increase in tky). All other taxes remain constant. Illustrate your answer with two diagrams: the first is based on the assumption that technology in the Y -sector is Leontief (Oy = 0). The second is the general case (Oy > 0). Explain the key economic mechanisms behind your results. Question 3 Consider the standard Harberger general equilibrium tax incidence model discussed in Chap- ter 6 (section 4) of the lecture notes. Assume, however, that the X-sector is relatively capital- intensive according to both intensity measures. Derive the effects of an increase in the tax on capital in the Y-sector (i.e. an increase in tky). All other taxes remain constant. Illustrate your answer with two diagrams: the first is based on the assumption that technology in the Y -sector is Leontief (Oy = 0). The second is the general case (Oy > 0). Explain the key economic mechanisms behind your results